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Poster: Administrator, Curator, or StaffMonte B Cowboy Date: Jun 25, 2012 10:29am
Forum: GratefulDead Subject: Re: The Supremes

http://billmoyers.com/segment/matt-taibbi-and-yves-smith-on-the-follies-of-big-banks-and-government/

re: bigger problems... The Federal Reserve...
BILL MOYERS: What do you mean when you say banks should be more like a utility?

YVES SMITH: Banks, more than any other business, more than military contractors, live off the government. They depend on government backstopping. They exist only by way of government issued licenses, which if you had open entry you'd see much lower fees. And they get some confidence from the public from the fact that they are regulated. Oh, and the most important thing is they have access to--

MATT TAIBBI: The Federal Reserve.

YVES SMITH: --the Federal Reserve.

MATT TAIBBI: They're getting huge amounts of free money.

YVES SMITH: Well, not just the free money. The Federal Reserve basically guarantees the payment system. You know, that's the really critical architecture that banks control is that, you know, we write checks to each other. We have credit cards. They clear through banks.

But the fact that banks can exchange money with each other confidently is because the Fed stands behind that. So there's a much-- there's another layer of Fed backstopping beyond what we think of the way they step in in a crisis or the way they're now intervening to help the banks. So the fact that these institution really depend in a very fundamental way on government support means they don't have any right to the upside.

I mean, they should really be paid like public servants. I mean, I'm not kidding. I mean, and if they had been, if the pay had been ratcheted down after the crisis, I would have had a lot more sympathy for them, even if they just behaved for a couple of years. You know, they were bailed out. And then in 2009 the industry went and paid itself record bonuses, higher than 2007 instead of rebuilding their balance sheets. I mean, this was just a slap in the face for the public.

BILL MOYERS: And there's no shame.

YVES SMITH: No.

BILL MOYERS: You're describing a corrupt financial and political system. And both of you in recent writings, your current article in "Rolling Stone," which is devastating on the scam that the "Wall Street learned from the Mafia," and a recent column you wrote about the mafia state, you're both using that metaphor to apply to our financial and political system. When I read your pieces, you're not playing with words there. You mean it.

YVES SMITH: Yeah.

BILL MOYERS: Why do you mean it?

YVES SMITH: Well, the mafia, when it gets to be big enough, first thing it has services that people feel they need if they're in a difficult situation. So, for example, loan sharking. If you really need money, they do have the money. And people enter into these loan shark deals even though they know it's going to be very difficult to pay 20 percent or more interest and they'll have their legs broken if they don't pay back.

And the banks actually behave very much in that manner when they find people who really need money. So you see this with credit cards, you know, that, or, and with mortgages. That if you hit any tripwire, that, you know, become in arrears, the banks basically act in this very extortionate manner and don't cut any breaks.

MATT TAIBBI: And I think that there's also this, they are the mafia because of their vast criminality in Wall Street now is that it's bribery, theft, fraud, bid rigging, price fixing, gambling, loan sharking. All of these things, it's all organized.

I mean, the story I just wrote about, which was about the systematic rigging of municipal bond auctions, which affected every community in every state in the country and all of the major banks were involved, including Chase.

They were rigging the auctions that were designed to create a fair rate of return on the investments that towns were getting on their-- the money they borrowed for municipal bonds. And this is not like something that the mafia does. This is what the mafia does. The mafia has historically, it's one of their staple businesses, is bid rigging for construction or garbage or, you know, street cleaning services, whatever it is.

They're doing exactly the same thing. The only thing that's different is there's no violence involved. But what their method of control is that they're ubiquitous. They have this incredible political power that the mafia never had.

YVES SMITH: And they also have what amounts to an oligopoly. I mean, for many of these services, you have a great deal of difficulty going beyond the five biggest banks, you know? This is-- it's the consequence of too big to fail is that when, you know, some of the smaller players, again, you know, like-- JPMorgan buying Bear Stearns.

In the crisis, when the smaller players got sick, they were merged into the bigger players. So now if you want-- for a lot of these services, there aren't that many players for you to go to. You really have no choice in-- other than to deal with the big banks.

BILL MOYERS: Congress is paid to be informed and to hold these guys accountable. Why don't they ask the kind of questions you're dealing with here?

MATT TAIBBI: People refuse to look at these banks and think of them as organized crime organizations.

They in their eyes, organized crime is always either the Italian mafia or the Irish mafia. This isn't what it looks like. But that is who they are. And I think that they're treated with a kind of deference and respect, because traditionally that's not who they were. They were these icons of finance who helped build this country.

But that's not who they are anymore. And I think, it's hard for people to wrap their heads around that and treat them the way they should be treated.

YVES SMITH: Well, I think people don't want to think that there's something wrong with leaders. And CEOs are leaders of the business community. If you really believe that CEOs of businesses that are really fundamental to the economy are corrupt, you have to think of a very serious restructuring of the business and financial system.

And even if people kind of intellectually might be willing to contemplate that, they don't really want to go to what the implications are. So it's much easier for them to block out that thought.

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Poster: bluedevil Date: Jun 25, 2012 10:58am
Forum: GratefulDead Subject: Re: The Supremes

Saw this show yesterday. As I've mentioned before, Tabibi is why I keep my subscription to Rolling Stone.

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